Federal Agency Examines How Donors Report Charitable Contributions

The U.S. Government Accountability Office, the investigative arm of Congress, is looking into the “misreporting” of cash contributions to charity by individuals.

In a summary of the study’s parameters, the federal agency said that data from the Internal Revenue Service show that “individual taxpayers frequently overstate deductions and make other errors when reporting cash contributions to charities.”

‘Pros and Cons’

The agency is working to “identify pros and cons of potential options to improve compliance, including, if possible, their potential impact and costs and burdens on taxpayers, IRS, and third parties.”

The agency was asked to review the matter by Sen. Max Baucus, the Montana Democrat who chairs the Senate Finance Committee, and Sen. Charles E. Grassley of Iowa, the senior Republican on the finance committee.

The agency said it was asked to:

• “Provide information on the characteristics of individual taxpayer misreporting of charitable cash contributions.”

• “Provide information on actions [the] IRS takes to address individual taxpayer misreporting of charitable cash contributions.”

• “Evaluate potential benefits and challenges associated with requiring information reporting for charitable cash contributions.”

To carry out the study, the agency said it would interview organizations representing charities and would talk with IRS officials “to identify any challenges they face in addressing noncompliance” with tax laws.

The agency also said it would review IRS documents and research, including data from the IRS’s National Research Program, which measures how well taxpayers comply with the law. The agency said it might look at a statistical sample of taxpayer files from the National Research Program.

The accountability office said it would review the “IRS’s compliance programs that address charitable cash contribution misreporting” by reviewing documents, enforcement data, and tax forms and publications.

Michael Brostek, director of tax issues for the office, said the study could be finished within the next couple of months and most likely would be made public.